IRC boss decries 'vortex' of EU's nexus of finance and aid

Europe has “gone backwards” in its attempts to marry humanitarian and development aid and is failing “people in need,” the head of the International Rescue Committee has told an international conference. David Miliband, speaking at the European Humanitarian Forum in Brussels, attacked the record of the so-called nexus — a 2017 European Union initiative to incorporate long-term development and private finance into its humanitarian relief work. Miliband warned that humanitarian and development donors disagree on what they are trying to achieve when working together on the same problems, telling the audience: “Without clear and agreed outcomes, we're all sunk.” He also questioned attempts to expand the use of complex financial instruments such as social impact bonds to plug the funding gap, arguing cash transfers are a more effective way to create a market for local traders and saying: “We're in danger of making things more complicated than they need.” “This nexus discussion is becoming a vortex rather than a nexus, and it's not actually doing any good for people in need,” Miliband said, calling for the failings to be “top of the agenda.” The criticisms came during a panel discussion on how to “incentivize private finance to invest in fragile contexts and help address humanitarian needs,” on the premise that “results have been promising” from pilot schemes. The EU has been promoting its Resilience and Humanitarian-Development-Peace Nexus since 2016, bringing together short-term, lifesaving work and longer-term development efforts as a way to create “peaceful and robust communities.” Maximilian Martin, head of philanthropy at the London investment managers Lombard Odier, told the session that two decades of “innovative finance” had failed to “industrialize” such ideas and the EU should go further. He proposed funding “feasibility studies” that are “truly entrepreneurial” even if that meant “failing in some dimensions,” telling the audience: “We need to give ourselves permission to be creative.” Paula Redondo Pereira, head of regulatory affairs at the Luxembourg Stock Exchange, said better data was allowing investors to “track holistically the life cycle” of green bonds and social impact bonds. “These are tools that can actually promote, enhance, and be a source of inspiration to the humanitarian space,” she said. But Milliband, a former United Kingdom foreign secretary, attacked the “stereotype” that NGOs are “full of big-hearted people who don't really care about results” which only concerned “flinty-hearted people” in the private sector. He said it was important to “be humble when you're meeting Maximilian because, with your banker, you always have to be on your best behavior,” but argued for “humanitarian debt swaps” rather than financial bonds, an initiative that IRC is “excited” to be pursuing with the EU. “Countries are often loaded with a lot of debt that is trading at a very low value, and the interest rate has a big risk premium on it. This is a vicious circle, and the idea of a humanitarian debt swap is to restructure that debt with a political guarantee from a country or from one of the international financial institutions. You then dedicate a proportion of the savings towards a humanitarian goal,” Miliband explained. The IRC president concluded, on the record of the EU nexus: “We've gone backwards on that idea of collective outcomes over the last five years rather than forwards. “The development donors and the humanitarian donors continue to have divergent definitions of what they plan to achieve, even when they're trying to work on the same set of issues. If you don't know what you're trying to achieve, it's impossible to measure it. If you can't measure it, you can't get the right incentives either for the private sector or for the public sector.”